French carbon tax debate turns toxic for Sarkozy

2nd September 2009, 0 comments

The French president plans on introducing a new carbon tax on household fuel and transport but critics argue this is unfair for ordinary families.

Paris – French President Nicolas Sarkozy's plan for a carbon tax on fuel threatened Tuesday to backfire as critics slammed it as unfair and his own camp fretted it will anger voters already hit by the crisis.

Sarkozy is due in coming weeks to announce details of a new tax on transport and household fuel, to be in the 2010 budget as part of France's drive to wean consumers off polluting energies and slash global warming emissions.

But with France barely out of recession and unemployment still on the rise, consumer groups have warned against piling hardship on ordinary families.

Several dissident voices in Sarkozy's right-wing UMP have raised the alarm, fearing that introducing a new tax, especially one seen as unfair, is political suicide in the current climate.

Spotting a chance to score political points, his former presidential rival Segolene Royal savaged the proposed Climate-Energy Contribution as "unjust" and "inefficient" at the Socialists' annual congress at the weekend.

She argues a flat levy on fuel would hit low-income families disproportionately hard – especially those in out-of-town areas who have no choice but to use cars – without helping to develop clean alternatives.

Royal said the government would do better to "tax oil and energy companies based on the profits they make from fossil fuels" and invest in electric cars.

The toxic turn of the debate has alarmed environmentalists, with the lobby group France Nature Environment saying Royal's attacks risked turning voters against the idea of green taxation.

"You cannot get the same results as the carbon tax by taxing Total's profits. It's not possible, and to say it is populism," FNE's spokesman Arnaud Gossement charged Tuesday.

Under proposals floated so far, all revenue from the carbon tax – estimated at EUR four to eight billion – would be handed back to consumers, in the form of "green cheques" or tax cuts elsewhere.

But France's junior environment minister, Chantal Jouanno, says the government faces a "very intricate" balancing act to ensure the tax is fair.

Former Socialist prime minister Michel Rocard, who headed the bipartisan panel that drafted the plans, admitted to AFP on Monday "there is a real risk of social injustice."

He said the key question facing the government was "how do we redistribute the money to people in a way that changes their behaviour, but without harming their overall spending power."

Finance Minister Christine Lagarde insists the overall tax burden on French households will not rise, and denies the proceeds will be used to replenish the state's coffers.

But she also admits that it will not be a win-win situation – some families will pay more than others, based on their carbon footprint.

Based on France's commitment to slash global warming emissions by 75 percent by 2050, the draft plans call for a levy of EUR 32 for every tonne of carbon dioxide emitted, rising to EUR 100 per tonne in 2030.

In practice the carbon tax would add EUR 0.077 to the cost of one litre of unleaded fuel.

Household heating costs would rise by between EUR 60 and 170 per year, depending on the type of building and method used. Half of all homes would see their total bill for transport and heating jump by an estimated EUR 300.

Fearing a consumer backlash, the government has already said the levy would start at no more than EUR 15 or 20 per kilo of CO2, described by Lagarde as a politically "acceptable" figure.

Sarkozy's government has said it hopes eventually to extend the carbon contribution to all goods and services, to shift part of the overall French tax burden from labour towards polluting goods.

Four European countries – Sweden, Denmark, Germany and Britain – have so far adopted tax measures to curb consumption of energy-hungry products.

The climate contribution is separate from a proposal floated by Sarkozy in March for a carbon tax on imports from countries which have lower environmental standards than France.